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Rating agency ICRA in its latest report has said that the higher-than-budgeted revenue collections, mostly higher tax devolution from the Centre, will help states reduce their market borrowing to Rs 7.6 lakh crore in FY22, which is 4.7 per cent lower than the year-ago level. It pointed out that this is because after the 12.6 percent contraction in the gross state development loan issuance to Rs 3.1 lakh crore in H1 of FY22

The report said the RBI pegs the market borrowing of 26 states (other than Odisha and Tripura) and two Union territories at Rs 2 lakh crore, which is similar to the level in Q3 FY21. Factoring in its expectation of higher-than-budgeted central tax devolution in FY22, it projects the net state development loans (SDL) issuance at Rs 1.7 lakh crore in Q4 of FY22, which will be 15.3 per cent lower than Rs 2 lakh crore in Q4 of FY21.

Forecasting that gross SDL issuance will decline by 8.1 per cent in the first three quarters of FY22, the report said if the actual issuance of Rs 3 lakh crore in H1 added to the gross issues of Rs 2 lakh crore indicated for Q3, total issuance will contract by 8.1 lakh crore to Rs 5.1 lakh crore the first three quarters of FY22 from Rs 5.6 lakh crore in the same period last fiscal.